Introduction
At
the IFS Executive Forum, which took place on March 29 and 30
in Orlando, Florida (US), leading research analysts and industry experts discussed
how companies can still leverage technology to maintain their competitive edge,
even during tough economic times. The event was held in conjunction with IFS
World Conference 2004, and it included six panel discussions, with
each panel including top executives, analysts, and journalists. Some of the
renowned panelists were Geoff Dodge, vice president, Business Week;
Dave Caruso, SVP, AMR Research; Barry Wilderman, vice president,
Meta Group; Leo Quinn, vice president of operations, Global
Manufacturing Solutions, Rockwell Automation; Dave Brousell,
editor-in-chief, Managing Automation; David Berger, Western
Management Consultants; and Josh Greenbaum, principal, Enterprise
Applications Consulting. Breakout sessions explored such topics as
turning global competitive threats into opportunities, increasing the bottom
line through operational efficiency, complying with the Sarbanes-Oxley Act of
2002, and using enterprise software to prepare for future challenges.
Technology
Evaluation Centers (TEC) was represented at the executive
panel titled "The Future of Enterprise Software and How It Impacts Your Profitability,"
which was aimed at helping companies find out where enterprise software is going
in the next five years, and how it can make or break their profitability and
market share. The panel, which was moderated by Josh Greenbaum, included the
following participants: Barry Wilderman; Peggy Smedley, president and editorial
director, Start Magazine; Dave Turbide; an independent consultant
and renowned columnist for magazines such as The Manufacturing Systems;
and Predrag Jakovljevic, research director at TEC. In preparation for the event,
we polled the thoughts and opinions from our following experts and contributors
Olin Thompson, Jim Brown, Joseph Strub, Kevin Ramesan, and Lou Talarico, given
they were unable to attend the event in person.
Below
are the questions and consolidated thoughts and answers that transpired from
the panel discussion, but we also took the liberty to expand with a few pertinent
questions and thoughts that were not discussed at the panel per se (due to the
time limit), but which transpired from many other interactions and presentations
at the conference. Also, pertinent articles that have been published earlier
on our site, and which may shed more light on the respective topic are mentioned
here as further recommended readings.
The
questions are
Q1.
What is the one piece of new software or technology that will be a must-have
in the next five years? (see Part One)
Q2.
Some pundits say the future of enterprise software lies in service-oriented
architectures and component applications. True? False?
(see Part One)
Q3.
How does the development of new business processes and business
process modeling fit in? (see Part Two)
Q4.
What are applications hosting and other service models? (see
Part Three)
Q5.
Radio frequency identification (RFID) is on everyone's mind
these days. Let's discuss the software issues around RFID and what kind of software
solutions will be taking advantage of RFID. (see Part Four)
Q6.
Technology aside for a moment, what can we say about its impact on profitability?
(see Part Five)
Q7.
With all this new technology, the question is what happens to existing applications
and technology. Nobody wants to start over, but how much will existing
IT systems have to change? (see Part Five)
Q8.
Will the newest and greatest only come from packaged software? What about custom
development? What is the build versus buy equation look like in the
near future? (see Part Six)
Q9.
How will the latest improvements in software flexibility and agility play in
the single-vendor versus multi-vendor solution
equation at multi-division corporations? (see Part Six)
This
is Part One of a multipart trend note.
Each
of the following parts covers questions and answers addressed by the panel.
Questions and Answers
Q1.
What is the one piece of new software or technology that will be a must-have
in the next five years?
A1:
There is no technological magic bullet or panacea in our belief. Companies should
constantly look to find their biggest opportunity for business improvement (incrementally,
more likely than in a "quantum leap" manner) and then find software that presents
a solution, whether it be something as simple as desktop applications or something
as complex as global supply chain management (SCM) solutions. More
feasible integration between disparate applications and more agile management
of processes between enterprises will be increasingly important, though.
From
a functional perspective, and based on the traffic and interest on TEC's web
sites, the tangible return on investment (ROI) seen market-wide, and
the relatively lower implementation risks compared to other enterprise applications,
we could point out business intelligence (BI)/analytics/enterprise
performance management (EPM); warehousing management systems (WMS);
e-sourcing; lean manufacturing applications; and product lifecycle management
(PLM) collaborative applications, of course, assuming the valid business case
exists in the organization.
For
more information, see the following recommended readings:
The
Hidden Gems of the Enterprise Application Space,
The
PLM Program An Incremental Approach to the Strategic Value of PLM,
Business
Intelligence Success, Lessons Learned,
Financial
Reporting, Planning, and Budgeting As Necessary Pieces of EPM,
Pull
versus Push: a Discussion of Lean, JIT, Flow, and Traditional MRP and
Run
your Business with no Software!
Q2. Some pundits say the future of enterprise software
Q2.
Some pundits say the future of enterprise software lies in service-oriented
architectures and component applications. True? False?
A2:
In a nutshell, true. Componentized applications and assembled (composite) solutions
have been the goal for some time now. An adaptable architecture is the least
common denominator for a flexible and agile enterprise system. Although a component-based
architecture is not an explicit requirement for enterprise applications' flexibility,
component-based applications generally provide greater flexibility than their
monolithic counterparts. Componentization refers to the act of breaking
up large, monolithic enterprise systems into individual modules or components
that would work together. It is the practical embodiment of object-oriented
programming (OOP), which was developed to enhance software maintainability
and to simplify the creation of advanced graphical user interfaces
(GUIs). Object orientation means that design, linkages, and so on, use objects
as their basic building blocks, which is a radical departure from traditional
"procedural" design and coding methodologies. By maintaining processing logic
with the data it works with, programmers have an easier time finding reusable
pieces. Therefore, object-oriented systems can be significantly smaller and
easier to maintain than classical procedural code in which procedures and data
are separated.
By
breaking up the large applications into components, vendors are able to more
quickly fix or add functionality. A component can be something as simple as
a supplier record, or a more complex business process or workflow. The accounts
payable component, for example, could be enhanced without having to touch any
other financial components or any of the other modules, such as planning or
logistics. And once the vendor has established component architecture, it becomes
easier and safer for IT departments to customize the systems. Componentization
has proven to be crucial to enable traditional back-office systems to support
e-business activity since the new e-commerce capabilities are being delivered
as individual components. Componentization has also helped the vendors extend
the core ERP back-office system with SCM, customer relationship management
(CRM), and other ERP-adjacent solutions.
Componentization
would not only make it easier for the ERP vendors to enhance their solutions
but also make it easier for customers to upgrade the software. With componentization,
a customer could incrementally upgrade only selected components without having
to upgrade the entire ERP solution, which usually would entail a substantial
effort. In summary, component-based architecture is beneficial for the following
reasons:
- It
allows a developer to create a composite application in which typically a
web-based user interface accesses functionality in the packaged application.
-
It can enable message-broker-based integration of several disparate packages
or legacy systems.
- It
allows a vendor to roll out new versions of the application in a modular,
incremental fashion rather than all at once.
-
It may drastically reduce the total application code.
Componentization
is thus necessary for vendors to move their back-office systems into e-business
and to provide other capabilities and therefore most vendors insist they remain
fully committed to it, although progress has been moderate. The reason for this
lays in the fact that componentization is enormously difficult to achieve even
when the commitment is solid. With some honorable exceptions, most tier 1 vendors
have mostly succeeded in creating large-grain proprietary components, which
are simply large function modules. On the other hand, IFS leads
the pack of more nimble, mid-market ERP vendors that have either entirely or
to a significant degree componentized their products.
However,
service oriented architectures (SOA) should help us further down that
path. The closer we can make the software map to the business processes and
adapt over time, the better the applications will support business objectives.
A well constructed application that tightly integrates and yet loosely decouples
a set of solid, yet customizable modules will certainly find customers in this
market. SOA is an application architecture in which all functions, so called
"services", are defined using a description language and have evocable interfaces
that are called to perform business processes. Processes, transactions, and
special functional components all have to be exposed as services allowing composite
applications to be exposed. Each interaction is independent of each and every
other interaction and the interconnect protocols of the communicating devices
(i.e., the infrastructure components that determine the communication system
do not affect the interfaces). Because interfaces are platform-independent,
a client from any device using any operating system in any language can supposedly
use the service.
Though
built on similar principles, SOA is not the same as Web services, which
indicates a certain collection of technologies, such as simple object access
protocol (SOAP), universal description, discovery and integration (UDDI), web
services description language (WSDL) and extensible markup language (XML). XML
is used to tag the data; SOAP is used to transfer the data; WSDL is used for
describing the services available; while UDDI is used for listing what services
are available. Used primarily as a means for businesses to communicate with
each other and with clients, Web services allow organizations to communicate
data without intimate knowledge of each other's IT systems behind the firewall.
Being web-based applications that dynamically interact with other web applications
using open standards, Web services act analogically to electronic data interchange
(EDI), with the difference of being an electronic process interchange instead.
On the other hand, SOA entails much broader notion, given it is more than a
set of technologies and runs independent of any specific technologies.
Thus, still emerging
Web services technology is likely to increase the component applications concept's
awareness and speed up its still fledgling adoption. Large vendors' endorsement
of Web services technology might indeed help them make up for their latency
of endorsing the component technology several years ago. Web services have a
potential of becoming the latest evolution of application integration technology
and a revolutionary new application design model by enabling developers to create
or enhance applications by connecting granular components that are accessed
via platform-independent Web protocols. While Web services leverage the aged
concept of objects' reusability, they may finally offer that extra mile
by adherence to standards that are taking hold. Further, they tend to be simpler
in their nature, partly owing to the collaborative Internet standards, and they
also tend to be higher-level abstractions, which implies more likely platform
independence and "mixing and matching" opportunity by developers.
Furthermore, the strategy will help the likes of SAP further
open and/or componentize their products, as standards like XML and extensible
stylesheet language (XSL) make it possible to share data and have a common look-and-feel
across an application, without necessarily dreadfully digging in the source
code.
For more information,
see the following recommended readings: What's
Wrong With Enterprise Applications, and What Are Vendors Doing About It? Part
Two: A New Framework Strategy and The
SOAP Opera Progresses - Helping XML to Rule the World.
This concludes
Part One of a multipart note.
Each of
the following parts covers questions and answers addressed by the panel.